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Tuesday, December 22, 2009

On bottlenecks: To be or not to be?

Funny thing, these bottlenecks. As my fellow chefs have noted, the one thing you don't want to do when you run your own company, is to be the bottleneck- to be the one that keeps your organization from creating and capturing value. Yet, when it comes to your position in your industry ecosystem (what we have termed "industry architecture", as I discuss in www.london.edu/mjacobides), what you want to do is to be this "bottleneck", i.e. the most valuable part of the sector, the hardest to replace, and one without which stuff does not happen. So much as you should ensure that you balance your own energies as a manager and ensure that you're not too busy on one set of activities, keeping your firm from growing, as a strategist you need to put your firm in a pivotal position that allows it, if it so wishes, to stop the value creation process.

The insight here is simple: Your objective is to become irreplaceable, and you can do this either by making your value add greater, or by making your partners more interchangeable. This is what Microsoft did as it managed to become the dominant player in the computing ecosystem, engaging in a world of one-sided alliances; and this is what Google is trying to do in mobile telephony, becoming the bottleneck in the Android platform, inviting all and sundry to cooperate with it. So, when it comes you your position in the industry architecture, think strategically - and build alliances that enhance your relative power!


Duke Roberts said...

Very insightful! So basically you say that even if you start to delegate and give out authority, you can still remain a unique and irreplaceable piece of the puzzle.

In your opinion, is this mostly due to interpersonal relationships or a more deep know-how on how a company really functions?

Ivan said...

Good article. I have a question for author: What is Industry Architecture?